Shareholders’ Role In Ensuring Corporate Governance
Speaking at a pre AGM cocktail organised by shareholders of a prominent company, I was inundated, with questions regarding shareholders role in corporate governance.
It has been stated that corporate governance refers to the set of systems, principles and processes by which a company/corporation is governed. It has been accepted that they provide the guidelines as to how the company can be directed or controlled, such that it can fulfill its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. It is noted that corporate governance is based on principles such as conducting the business with all integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the stakeholders and commitment to conducting business in an ethical manner.
The practice amongst Nigerian companies and managers has been to tilt towards “performance” as against “conformance”. One often is greeted with the phrase “just do it and get me a results and I don’t care how you do it…” from some of our managers to their subordinates. What this implies is that any means of achieving results is welcome.
What I have observed in our corporate governance regime is that, our maturity profile on the average shows that the managerial leadership in the various sectors, though possessing basic tactical decision making skills, lack strategic foresight; and more importantly, roles and responsibilities for decision making are ill defined and decisions are made in isolation without coordinating multiple stakeholder perspectives. Finally, it reveals that the measurement of effectiveness and efficiency of performance oversight within our economy is still evolving.
Despite all the “grammar” the simple question is where does this leave the ordinary shareholder?
The shareholders as owners of the business possess the potent power to vote in determining the composition of the board; consequently, they could exert influence in ensuring effective corporate governance of their institutions by taking a combination of steps as out lined below.
According to our colleague, Scot Lane of the Red Flag Group “… what shareholders should be asking…is whether directors have fulfilled their broader oversight duties, and run the company according to the highest independent measures…”
To determine this, it is worth considering the following questions:
Competence – Is there a process for ensuring board competence and independence and how often is this reviewed? Are directors coached, developed, continually assessed and kept closely in touch with the company’s day-to-day operations and challenges? Focus – Are there board committees to oversee compliance, ethics and risk, and acknowledged experts in strategy, finance and operations?
Process – Does the board have clearly defined and documented processes to guide its operation? Do these cover issues such as remuneration, attendance, individual performance, public relations, conditions for re-election or termination, disclosure of possible conflicts of interest and the management of dissenting views?
Delegations – Are there clear instructions to management grades defining their authority, responsibility, accountability and reporting obligations? Has the board implemented signature policies and signing off requirements that allow them to delegate certain activities while maintaining control and accountability?
Performance of executives – Does the company have a clear system to measure performance against realistic expectations and goals? Is there a transparent method to send directions from the board to senior management? Are there effective, integrated systems to manage and report compliance, ethics, governance and risk issues?
Escalations – Is there a reliable mechanism to make the board aware of all matters that may fall outside the scope of authority delegated to management?
Communications and training – Are the roles of board directors and other executives clearly articulated? Does every member of staff understand where and how corporate governance issues affect their role?
A careful review of the foregoing would enable shareholders contribute towards the enhancement of effective corporate governance in their institutions.
Sir Chukwu Jideani